tv Your Money CNN July 9, 2011 1:00pm-2:00pm EDT
coming up in the 2:00 eastern hour, surviving joblessness and debt. we're going to talk about the correct way, the most responsible ways to use your credit cards when money is tight. i'm fredricka whitfield. "your money" starts right now. less than one month until we reach the august 2nd deadline to raise the debt ceiling. we've been here before but not quite this close to default. welcome to "your money." i'm christine romans. ali velshi is off this week. so what could change for you in an eventual debt ceiling deal? three huge issues to watch will be tax increases paired with possible cuts to social security and medicare as part of what could be $4 trillion in proposed debt reduction? jeanne sahadi joins us. >> they say we have to raise taxes on the wealthy and close corporate tax loopholes. the republicans say, no. we're not going to be raising
taxes in the wake of the jobs report. democrats say, we're not going to be on board with any cuts to social security or medicare. we want those to be dealt with separately in the same way that republicans want to deal with taxes separately. democrats say, we're not cutting social security and medicare. and this week, they got very upset when they heard reports that president obama may be considering a change in the way inflation is calculated which would affect the cost of living adjustments for social security benefits. >> they sure were upset. and even nancy pelosi stood up and said, this needs to be handled separately. mark preston is a cnn senior political editor. if the debt ceiling is not raised, 42% will say it's because of congressional republicans. 33% will say it's because of president obama. both sides are spoeszupposed tod the weekend figuring it out. which side has the most to lose? >> in the short term, it's
certainly going to be house republicans who are seen as obstructionists at this point. but in the long term, it's going to be president obama. when he's running for reelection a lot harder next year, he's going to be running on the fact that we have an loumt p raunemp rate right now at 9.2%. the leaders are going to meet this weekend. the republican house leadership on friday canceled their week-long recess that was supposed to take place later this month. at least we know they're talking right now. here in washington, that's a huge step forward. >> the rest of us are like "talking"? get some work done. but i get it. the backroom talking is part of the work. ken rogoff joins us. congress has raised the debt ceiling 78 times since 1960. but with a fierce debate over tax cuts versus spending cuts.
the national debt totaled $14.2 trillion. this is 100% of the american economy. this is our debt pile. we're fast approaching rates we haven't seen since world war ii when our debt was bigger than the side of the economy and back in the great depression. this is what economists call a debt crisis. why? we are a borrowing nation, bottom line. we borrow money. right now for every dollar the government spends, 38 cents of it is borrowed. if the debt ceiling isn't raised in time, the u.s. could default on some of its payments and that's the last thing we need when we're recovering from a recession. ken, you have the financial crisis expert. would failure to raise the debt ceiling trigger another global economic disaster? >> well, it's playing with fire, there's no question about it. the foreign investors, investors are not expecting the united states to default. if they were, we'd be paying way higher interest rates right now. but if we actually did it, it would be a catastrophe. but there's a bright side to
this, which is that a year ago, nobody was talking about our unsustainable long-term debt trajectory and now they are. we really need to. so that's at least a good side of this. >> mark, moderate conservative voices like david brooks of "the new york times" are telling republicans it's time to make a deal. brooks wrote this week and it got a lot of attention. if the debt ceiling talks fail, independent voters will see that democrats were willing to compromise but republicans were not. if responsible republicans don't take control, independents will conclude that republican fanaticism caused this default. they will conclude that republicans are not fit to govern and they will be right. got a lot of attention. i asked senator jim demint about it. and he said, well, david brooks doesn't speak for true republicans. that's what he said. >> he doesn't speak for jim demint, that's for sure. he certainly doesn't speak for some of the house freshmen that
were elected on the whole idea -- this whole tea party fols fi that they're going to come to washington and shake things up, basically be obstructionists. but david brooks is absolutely right. what weave seen here in washington is kind of a sad note over the past couple of years. we've seen negotiators and compromisers leave. so many senators have left, they're no longer on capitol hill behind me. they were the ones who would be able to cut the deals. that's why i think you're seeing at this point that the deal is a little bit hard tore cut. having said that, it's not just the extremists, so to speak, on the republican side. it's the extremists on the democratic side. we've already seen fund-raising letters go out from these liberal groups saying that social security cannot be touched, that medicare cannot be touched. guess what? it has to be touched. so the question is, how can it be touched? extremism right now here in washington is, i hate to say this, is at an all-time high.
>> it really is. jeanne, you know this more than anybody else. when you look at the numbers, these kinds of cuts have to be done very carefully so that you don't really change our living standard dramatically, quickly and right away. jeanne, washington politicians doing things carefully and thoughtfully, does that happen a lot, sometimes, never? >> well, i don't know. it's not happening now. we'll see what they come up with in terms of a debt ceiling deal. they could do the right thing. deficit hawks have been saying for a long time, we need to make a decision about how to reduce the debt. we don't need to implement it lickety-spl lickety-split. but it will give confidence to the market if we give them certainty about where we're going. but extremists are saying, no. there's not -- you're not seeing the leadership that everybody says we need that talks about that middle ground. >> ken, can we fix this problem
with if as the republicans want, we put tax reform aside and has the progressives and liberals want, we put social security -- entitlement reform aside. put those two things aside, can you fix this problem on its own? >> i think it's easier to cut a meaningful deal by doing everything together rather than one at a time because you can make bigger compromises. christine, another way to look at this is the president has gained power decade after decade, the executive branch has gotten stronger. and this is in some ways a constitutional clash where the house of representatives is saying, no, we have more power, we have this weapon we can use, the debt ceiling and they're hammering the president over the head. and they're getting a lot of traction. it's an important moment not just about the debt but about the whole way our country is run. >> mark, it's interesting. if they don't raise the debt ceiling and global markets are already kind of wondering if this might happen but they know the treasury department might have some leeway to pay some bills and the global capital
markets like that we're getting our debt situation under control, if nothing terrible happens the first day, will republicans say, see, we told you so? >> they will. but let's talk about two weeks down the road when things could be -- could totally implode. i'm not the economist here. but let's remember, congress -- if our viewers don't remember this because we all have short attention spans. congress leaves in august. they won't be here in washington. this town shuts down. so by august 2nd if a deal isn't reached, one of two things are going to happen. congress is going to have to stay here and try to fix it or they're going to lead and there will be huge political implications if we get into that situation. >> jeanne sahadi, thanks so much. 2 1/2 years into president obama's administration and the unemployment rate remains sky high. we head to the white house next to ask a key economic adviser why the president's policies are not creating more jobs.
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that's what the unemployment situation looks like right now in america. when you look at jobbed created, you see only 18,000 jobs were created in june. that is much worse than expected and may was revised downward. had been 54,000. now only 25,000. let's take a look at private versus government-sector spending. that's a pretty important part of this story. it shows you that state and local governments are slashing jobs and have been, quite frankly, since about the end of 2008. while you've got the private sector, only tentatively hiring, 57,000 jobs created in the private sector. of course, policies in place in washington in the economy that make business owners confident that allow them to start hiring. that's something that is still in short supply. let's head to the white house now and talk to austan goolsbee. he's the chairman of the council of economic advisers and a member of the cabinet. austan, the unemployment rate for january 2008 when president obama took office was 7.8%. today, it is 9.2%.
republicans argue that it's because of obama's policies, not despite them. why aren't the president's policies creating more jobs? >> well, hold on. to start with, the unemployment rate, as you know, we were in the middle of the worst recession since 1929. so we have a deep downturn and then previous to the last two months, we add more than 2 million jobs in the private sector. i think the number today reiterates what we have known, and that is that because of a series of factors, the growth rate of the economy at the beginning of this year slowed down. when the growth rate slows down, so we're not growing as fast, we're not going to generate as many jobs. now, i view this number as a call to action. we should in washington be doing everything we can on a bipartisan basis to get the growth rate back and to help
facilitate the private sector standing up and leading the recovery. that's what has to happen. and there are a number of things that we can do right now that are teed up on the table in a bipartisan way. but i view it as that call to action. >> like what? what can you do right now to get the private sector hiring more? >> first, we can extend the payroll tax cut. second, we could pass the pending free trade agreements that are sitting there unpassed to increase exports in the u.s. and jobs in the manufacturing sector. third, we could create the infrastructure bank so that we can start putting back to work the 1 million construction workers that are unemployed in the country. and fourth, we could pass in a bipartisan way a balanced deficit reduction package that would remove the uncertainty which is now sitting on top of the entire private sector over whether u.s. government is going to be willing to pay its bills. that's a very dangerous argument. we shouldn't be having it.
we should pass a balanced plan and be done with it. >> infrastructure is something we thought the stimulus, this biggest expenditure of money so quickly in american history was really going to get started. and you're talking about 1 million people out of work in the infrastructure sector. your ideological opponents and republicans are say stimulus didn't work. and they'll even say straight-out that stimulus hurt jobs because it was the government -- government overspending getting in the way of private sector. what do you say to that? >> as i observe, in the 15 months previous to this slowdown in the growth rate, we added more than 2 million jobs in the private sector. and on top of that, the private sector forecasters, as well as the nonpartisan congressional budget office and many others, have observed that the company was on path to do substantially worse if we had not tried to intervene and take action. now, through tax cuts, through
infrastructure, through a whole series of things, we can argue about the past. but i think it's more productive to look at the numbers. if we're going to have a slowdown in the economy like we had in the first part of this year, what do we do now to get the growth rate back up? partly, most forecasters think it's going to rebound in the second half of the year. but there are a lot of bipartisan action that is we could take to help it. >> you said looking forward. as recently as three years ago, full employment in this country was considering something like 5%. looking forward, is the new normal for unemployment 9%? do you expect significant improvement by, say, november 2012? >> look, we have an official forecast. the official forecast says that the unemployment rate by the fourth quarter of 2012 would be 8.2%. so i'm not going to make any predictions other than what's in our official forecast. to your second question, though, of, do you think that the new normal is 9% or that in some
sense we should just get used to disappointment and the potential of the american economy is just below what it was before, that, i don't agree with. i think a lot of people do not agree with that. in our long-run forecast as well as the long-run forecast of people outside the government, the long-term unemployment rate goes back to something like what it was before, 5.3% or 5.2%. and i think we have the innovation. we have the capacity to go back to where we were. we just have to grow our way out of it. it's the deepest do you know turin since 1929. >> austan goolsbee from the white house, thank you sir. >> great to see you. >> ken rogoff joins me back again. a couple of good metaphors i heard today. this is like a big, cold bucket of water. another one said that this is like we're waiting for job growth to take off and instead we are sitting grounded in the terminal month after month waiting for our flight. what's your reaction to this
disappointing jobs report? >> the terminal one is a depressing thought. it's an awful jobs report. it's just awful. i was certainly expecting at least to get enough jobs to sort of keep us moving a little bit. unfortunately this is what happens after a deep financial crisis. this is par for the course. the average after a deep financial crisis postwars, four years or more of bad job numbers before things really start getting better. we thought we could beat things with our stimulus, aggressive monetary policy. but it looks like we won't. >> a lot of my colleagues have been asking me, why are the estimates so wildly off? i keep saying, we've come from such a dramatic move in the economy that people really are trying to get -- experts are trying to get a handle on where we go from here. am i right? >> absolutely. if you look at past financial crises and not past recessions,
it's a pretty good guide. we're right on track with the estimates looking at other countries that had similar experiences. so that's a good spin in the sense they do end eventually. >> ken rogoff, thank you so much. stay where you are. speaker of the house, john boehner, chose twitter to confront president obama with the question we're all asking, where are the jobs? the president's answer next. it's not because they ran it out of oil. they didn't change the oil. as your engine produces different particulants, you want to pick that up and take it down to the oil pan to the oil filter. so the moral of the story is, if you don't want to see your engine in a commercial with me and jim, make sure you get the works done. the works. oil change, tire rotation, $29.95 or less after rebate. only at your ford dealer. this good. this not
president obama hosted a twitter town hall this week. among the tweets he responded to included one from speaker of the house john boehner. he pointed to spending and debt and wondered, where are the jobs? >> we lost, as i said, 4 million jobs before i took office, before i was sworn in. about 4 million jobs were lost in the few months right after i took office before our economic policies had a chance to take any effect.
and over the last 15 months, we've actually seen 2 million jobs created in the private sector. >> mark preston joins us again. he's right on both of those counts. but can the president win with a strategy that says it was bad before i got here and i need more time? >> well, they've been saying that since day one, christine. at some point, they're going to have to start taking responsibility for what their own policies have led to. i was in las vegas this past week and i have to tell you, what a devastating place to be right now when you're talking about the economy and you're talking about jobs. and potentially devastating politically for president obama. i was talking to casino executives out there. even cab drivers, christine, they're telling you that people are hurting out there. politically what the problem is for president obama when it comes to a state like nevada, it's a battleground state. he needs to win that state. and you've seen double-digit unemployment out in that state ahole. the sahara hotel and casino,
that just closed its doors. president obama and his advisers, we saw austan goolsbee say it earlier, are trying to lay the blame back on the bush administration in earlier years. but the fact of the matter is, they're going to be on the ballot come november 2012 and they're going to have to answer some questions. >> politically republicans are hammering the president on jobs. let's forget the politics, though. as an economist, tell me, do the president's policies create the job crisis or have the president's policies just not been able to fully blunt or reverse the jobs crisis? which is it? >> oh, definitely the second. i think a bad jobs situation for years and years was baked in a cake when president obama took office. but that's not to say that the policies we're taking now aren't setting the course, a question of business uncertainty, consumer uncertainty. so certainly his policies
matter. but i don't think it would have made a big difference trying to follow a different path. i think we were in for a rough ride no matter what. >> can i ask you about the stimulus? i'm hearing from a lot of candidates. rick santorum said this week point-blank, the president's stimulus was a failure, it caused a loss of jobs. we know that's not true, we know it wasn't as positive in terms of saving or creating jobs as many add hopedment and other republicans are saying, look, the president's stimulus and his overregulation have actually scared off businesses. is that true? >> well, i think the health care plan definitely is an overhang, especially over small businesses. but i want to get back to something mark said. he's absolutely right that president obama's going to own this recession when he runs for reelection. but if you go back to the great depression, franklin roosevelt didn't do any better in his first four years. it really did not go well.
and somehow he was really popular. he somehow created empathy and people were willing to be patient with him. and president obama has to try to go that way because i don't think it's going to be great. >> you know, it's interesting, mark, earlier this week, david frem said he thought this whole debt ceiling showdown was a way to step back from the whole jobs debate. when do we move away from how we're going to create jobs, creating jobs, issue number one and suddenly it's the debt ceiling crisis? do you see what i mean about -- it was all about jobs before. now suddenly it's all about the debt ceiling. >> it's all about the debt because we're facing this deadline of august 2nd. and certainly the politicians behind me want to talk about the future and can we leave our grandchildren with this huge problem? but the fact of the matter is, we're americans, right? and we live in the now and we only want to talk about what's really going to affect us. so it's going to swing back. once a deal is struck -- bottom line, we all know a deal is
going to be struck. the question is, what is the final number going to be? it's going to swing back to the economy in the now and it's going to swing back to jobs because that's how you win elections. unfortunately, that's the best thing about america right now. if you don't like what someone is doing, you can vote them out of office. but having said that, every two years, you have members of congress who are up for reelection, many times they can't take principled stands, they have to take political stands if they want to win reelection. that's what we've been seeing. >> business owners have been telling me the economy is stabilizing for them. but it's not good enough and not enough clarity for them to hire more and that's just the bottom line. politics aside, that's the bottom for them. mark preston, ken rogoff, have a great weekend, guys. why the biggest threat to our economic recovery could be completely out of our control next. i'm robert shapiro.
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cnn money asked that money to 27 economists and their top two concerns were -- a debt default by a european country like greece and another oil price shock, potentially driven by further turmoil in the middle east and north africa. steven moore is editorial writer at "the wall street journal." this is a recovery that might be out of our hands. >> well, that's right. we can't control what's happening in greece right now or spain or some of these other countries that are in trouble and i agree with you and the economists that that's certainly a big overhang over the u.s. economy. you were talking in your previous segment about the debt crisis here in the united states. but the more europe gets into trouble, it sort of sends signals to people in the united states, maybe i should worry about the condition of the u.s. debt right now. i think that's a big one. i think obviously what's happening with commodity prices, oil prices. i'm a big believer that one of the things that really has hurt this recovery has been the increase in gasoline and oil
prices. >> oil prices moving back toward $100 a barrel not too long after they tapped the strategic petroleum reserve. diane swank joins us. the economists that cnn money surveyed said a default by a country like greece or the oil shock, do you agree with their concerns? >> absolutely. we don't know what would happen with another financial crisis if greece actually defaulted. would it cause contagion? there are a lot of ways it could cause contagion. the first time we had the beginning of this crisis in august of 2007, the federal reserve all of a sudden found it had to open swap lines to make sure they had dollars to continue lending into the u.s. as well. these are really critical issues. i think on the other side of it, it also heightens as we already heard, the focus on our own debt situation and what should we be paying for our debt? the reality is we know that higher energy prices -- the payroll tax has blunted some of the blow to higher energy price
but certainly not helped to stimulate the economy elsewhere. >> christine, could i say one thing. >> sure, jump in. >> about greece, i've always felt like what's happening in greece is like god sending a signal to the united states. this is what happens if you don't get your debt under control. so we should pay attention. >> is god a greek god? i'm wondering which greek god is god? >> it gets back to the -- we can go back to the whole mythological issues. this is a warning shot over the bough of our own debt situation. it's hard given the backdrop of the unemployment situation in the u.s. the austerity measures, we've got this political situation where we all want austerity, we know we need to get there. we don't want the riots in the street. we want to make a choice on this, not be forced to do it like we see in greece. but on the other hand, how many
politicians want to go back in august with blood of austerity on their hands. >> let's bring in jim. alan greenspan expressing his fear on what a default in greece would do to the united states. greenspan and others say, it could mean another recession. >> it could. but it wouldn't be in a direct way. unlike a lehman which sort of toppled the whole world into a financial crisis, that was here. a lot of u.s. banks were involved, a lot of counterparty activity there. with the greek situation, you have a lot of big european banks. particularly big german banks. and what will happen there is they'll take a hit at first. but it does ripple over into us. the other thing, as diane said, it has a big, big chance of contagion. what happens in greece could trigger then portugal. it could trigger something in ireland. maybe even something in italy. that then has a real impact on u.s. banks. there's a lot of counterparty activity there. there's also a lot of confidence impact. what happens when people
suddenly see other people can't pay their debts is that they stop lending. the financial system starts to seize. seizes up. that's exactly what happened two years ago. we don't want to see that happen again. >> diane, it's interesting, the president talking about the debt ceiling recently. not to get into the debt ceiling. i want to stay with greece for a minute. he said, we can't afford to have unpredictable things going on in the global economy right now. that's what this is about. we don't need anything unpredictable. >> we have frankly far too much unpredictable. we have a lot of uncertainty in the global economy. anything we can do to reduce that uncertainty at this stage of the game will help. we're two years into recovery -- i just got back from a broad meeting with economists all over the world and the uncertainty is higher this year than it was last year. risks of recession are higher than it was last year. it stretches the globe. developing economies which are now facing overheating, there are a lot of concerns around the globe.
there's a sense of we're walking on pins and needles out there. >> steven, let me ask you about oil prices. the president a couple of weeks ago announced they were going to tap into our emergency oil supplies to try to drive down gasoline prices because of some supply disruptions from libya. economists still concerned about the middle east, north africa, disruptions. was that the right decision -- do you think two weeks later when we're back toward $100, what does that mean about the decision from the white house to touch that oil? >> let me go back to greece. >> can you go from oil to greece and then to oil? >> one other component of this, even if we don't have a crisis, what happened in greece was the interest rates on their debt went up and up and up. it's like 16% now. we can't have a mini crisis with our debt. if we see a bump-up in our interest rates, that's not only going to make the debt situation worse but getting a mortgage and things like that problematic. on oil, i was skeptical at the
time that tapping the strategic petroleum reserves would make much of a difference. i don't think so far it really has. you might see a nickel to a dime change in the price you pay at the gasoline pump. but this is really about global supply and demand. it is about disruptions that are happening in the middle east. we could be doing a lot more in the united states. we just had an article in "the wall street journal" about this pipeline we're trying to build from canada that would bring a lot of new oil to the united states that's being held up by the epa. it's an example of we're not getting on our own natural resources that could bring prices down. >> environmentalists are pointing to the pipeline that burst in the yellowstone river. but we don't go there. we're going to be right back. what would president obama change if he had the chance st? the president reveals his do-over list next.
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president obama was asked what mistakes he thinks he's made, this during his twitter town hall meeting this week. at the top of the list, housing. >> we had to revamp our housing program several times to try to help people stay in their homes and try to start lifting home values up. but of all the things we've done, that's probably been the
area that's been most stubborn to us trying to solve the problem. >> he's sitting there with jack dorsey, a founder of twitter. the president also said he would have explained to the public more clearly that the recovery would take a long time. steven, i'm sure you have plenty you could add to the list of the president's mistakes. what do you think he should have done differently? >> awg -- i agree with him on the housing. the mortgage foreclosure plans haven't worked. the reason it's taken so long to reach the bottom of the housing prices is we've prevented the market from working. i think that's been a mistake. the other thing, i think the president should have concentrated on fixing our tax system, our corporate and business tax system isn't competitive in this global economy. and it's pretty easy to fix. >> jim, that's something they want to put aside when they're talking about this big tax reform and the liberals want to put entitlement reform aside, the conservatives want to put tax increases aside.
i don't know. do you think we're going to have any kind of meaningful tax reform any time soon? >> i don't think so. we're a little too close to the election for that. that's one big problem. the problem is it's very difficult to get people to think about long-term policy when you've got an election this close. instead, what's going to happen is there's going to be a lot more emphasis put on the things that voters are going to care most about. one of those is going to be employment. we're seeing terrible employment numbers now. that's really the sort of dinner table issue that's going to make or break this president. >> according to a cnn opinion search poll, 55% of americans still say president bush is more responsible for our current economic problems. just 30% blame obama. but nearly 60% of americans do not approve of how president obama is handling the economy. so even if americans don't blame this president for getting us into this mess, they also don't seem to be confident he's the right person to get us out. >> i think one reason is all people have to do is look at
their own job situation. they feel uncertainty. they have to look at the fact that the american dream seems to have having in two very distinct ways, it's not working. number one, the housing thing that they depended on forever as a store of wealth has gone away. and more importantly, the ability to have a job and move up has gone away. we've now gotten about 14 million people out of work. that's a huge number of people. and almost 7 million of those have been out of work for more than half a year. we haven't had numbers like that for a long time. we've had a recession that's lingered on. the recovery that we would normally be seeing now with 150,000, 160,000 jobs come in every month, we're down to 18,000 new jobs in june? we have a period where people are saying, things aren't working. they want to blame somebody. >> in more than 15 years of covering the jobs report, i've never seen a time when it's been
so political. minutes after it was out, you had republicans blaming the president. i heard, where are the jobs, mr. president? and the liberal perspective was, mr. boehner, those tax cuts for the rich aren't doing much work, are they? they're not helping very much, are they, mr. boehner? right away, both camps are just going at it. diane, we like to strip away the politics and get the economist point of view without all that silliness from washington. does a seemingly constant election cycle allow politicians to level with the american people that some short-term pain will be necessary to solve all of our long-term economic problems? >> i don't know if it's the election cycle, per se. people who watch this every day blame the congressional districts that have taken the competition out of the election process for the house. you've got ideology being elected over pragmatism and moderate. that means you're not getting a lot of compromise, a lot of discussion going on. and that really does divide things.
that's where the people who i know watch the politics really blame the problem. that's not going to stop. both sides have been very guilty of this. whoever is governor decides which district dos what. you look at these districts, they look like snakes. you can't even figure out what a district is anymore. then you get snakes elected, too. on the other side of it, i have been impressed. there is talk of tax reform. and they're starting to integrate with obama stepping in and bringing everybody into the white house saying, let's talk about this long-term deficit reduction, ten-year plan is what they're talking about. they're talking about tax reform. the gang of six, sometimes gang of five. they are really serious about this ideological extremes. they get along with each other. they seem to eat a lot of popcorn when they're talking. take a really big building, take everyone in congress, the administration, all their staffers, throw them in one building and throw popcorn in the windows and not let them
come out until they come out with something long term. >> we could put their blackberries into an enormous tree shredder -- >> i'd like to do that with my blackberry every once in a while. >> me, too. thanks to you all for joining us. he may be off this week. but you can always trust that ali velshi is working his sources. just how could you benefit from ali velshi's love of fast food? that's next. nshine ♪ ♪ my only sunshine ♪ you makes me happy ♪ when skies are grey ♪ you'll never know, dear ♪ how much i love you ♪ please don't take my sunshine away ♪ [ male announcer ] as long as there are babies, they'll be chevy's to bring them home. ♪
restaurant chain chipotle hit 52-week highs in the stock this week following an announcement the company plans to open outlets in paris and muni munich. the stock is up more than 130% in the last year. and it's just one fast-food companies investors can't get enough of. what's going right with chipotle? >> fast-food restaurants as a whole have done a fabulous job at changing to the preferences and the palate of the american
people. you can take your laptop restaurant to an average fast-food restaurant, sit down, enjoy the down and have some gourmet style coffee and have a menu selection of improved quality type foods they're offering. for less than $10, you can enjoy a nice, healthy lunch as opposed to 20 plus dollars at your traditional sit-down restaurants and doing a great job of companies like mcdonald's and young brands by expanding overseas and having foreign expansion. >> chipotle is its new kind of version of the fast food restaurant. some of the items are a little more expensive. there is more flavorful items and more choice, i think. >> exactly this is what the fast food restaurants have understood. at the end of the day, they don't want the fast food or the unhealthy type foods and don't want the same traditional type of fried foods we normally had but they adapted and the pattern of the american people have changed dramatically. the fast food restaurant has
been a stubborn type industry, they're going to force upon what they think consumers should like. now consumers are starting to respond a whole lot more. >> there has probably been more change in the past five to seven years than in 309 year in the before that, quite frankly. >> you can find people like myself in the restaurant with lay top and nice, chic intear yen and now they're giving snacks, so they're doing a fabulous job. >> ali and i have been fast food connoisseurs. >> i like the stock, they have done a great job of adapting to the american pallet, great food, great price and great experience. outside of a strong franchising they have, 50% of their revenue comes from franchises, they also have a pristine balance sheet. over $200 million, a whole lot of capital and cash on hand and
zero long-term debt. this company is a great place in order to capitalize off the depressed real estate market. start making strategic acquisitions over the next year. >> when you're an investor, it is not just about what's on the menu, it is about what is on the books and what management decisions are happening. is there a fund offering investors a mix? >> i like pbj. a great way to have a diversified cost effective way to get great exposure to a strong industry. 5% holdings with mcdonald's, 5% holdings in young brands and pepsi and starbucks. it is a great way -- pbj is not just the name of my favorite sandwich, but a good, cost effective diversified exposure. >> this one is up 32% over the past year. pa nairia, up 70%, chipotle up 107%. you buy them here, wait for a pullback, signs of strength they will continue or maybe the move already happened? >> for these individual stocks -- >> buy and hold stocks? >> over the next year or so, i
wouldn't expect a whole lot of good movement for a year or less. for four and five plus years, i would think that in my estimation, i think they'll have a stock split in the next year or next five years with all that cash on hand, probably offering a dividend. >> you get paid on the stock. ryan mack, nice to see you. have a nice weekend. does all this talk of fast food make you hungry for more money? chick-fil-a's founder is sharing the secrets about wealth and maybe the waffle fries too. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. [ shapiro ] we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side.
chick-fil-a founder and ceo fruit kathy grew up in the nation's first federally funded housing project in atlanta. now at age 99, the fast food mogul is asking himself if wealth is really worth it? cnn's martin savage has the story. >> you'll never realize your potential until you start performing at your best. >> reporter: 90-year-old fruit kathy imparted useful advice over the year and he's not finished yet. in his new book, the founder of the fast food restaurant chick-fil-a asks the question, wealth, is it worth it? if i asked you that very question, is wealth worth it, what would you say?
>> well, i've come to the conclusion, if you make money, honestly, and spend it wisely, and remember that the teaching of the bible is better to give than to receive. >> reporter: kathy started his first restaurant in 1946 in atlanta. with only ten stools and four tables, he called the diner the dwarve grill. the restaurant, bigger today, is where kathy is credited with developing the fast food chicken sandwich and eventually the chick-fil-a chain. his son dan, now president of the company, says his father's business philosophy is still the driving force of the operation. >> even though we're privately held family business, we still want to be a good steward of the resources entrusted to us. and the bible says if we'll acknowledge the loo acknowledge the lord in all the ways he'll direct our path. >> reporter: your son was telling me your early growing
up, you were very poor. and i'm wondering how did that impact the rest of your life? >> well, it didn't matter. everybody is in the same situation i was in. i was born 21. >> reporter: those days his family struggled to put food on the table. he keeps this wagon of coca-cola as a reminder of the first business he started, at the age of 8. >> i could buy six koecokes and sell them to neighbors at a nickel a piece. >> reporter: he learned the importance of customer service. that's still very much part of chick-fil-a. >> customer service is going to keep us alive. >> reporter: religion drives everything the chain does. and that's partly why the company remains closed on sundays. >> first of all, it honors the lord by being closed. secondly, it helps attract a couple of people that appreciate the sunday off. >> reporter: cathy and his wife still live in the home they purchased in 1956. he has a passion for collecting cars and dabbles in real estate.
his family owned company has sales close to $4 billion a year. by any definition, that makes cathy a wealthy man. but his definition is not the one you would think. how would you define wealth? what is a wealthy man? >> well, has various definitions. i think wealth, for myself, is a blessing because it is a good living and has -- and enabled me to help a lot of other people. and that's where the joy comes in. >> reporter: the secret to making wealth worth it, according to cathy, sharing it. martin savage, cnn, atlanta. >> make your money honestly and spend it wisely. trueet cathy. ali velshi is here every satuay and you can catch me on your bottom line saturday mornings at 9:30 eastern. stay connected with ali